METALS-Copper rises sharply on upbeat U.S. economic data

* U.S. nonfarm payrolls beat expectations, up 243,000 in Jan
* China Jan official services PMI falls to 52.9
* Shanghai copper stocks surge 36.6 percent

By Susan Thomas and Harpreet Bhal
LONDON, Feb 3 (Reuters) - Copper prices rose to a one-week high on
Friday after strong labour market and services sector data from the United
States reinforced confidence about the pace of recovery in the economy.
Benchmark three-month copper ended at $8,570 a tonne, from a close
of $8,345 on Thursday. The metal used in power and construction earlier hit its
highest level in a week at $8,586.75 a tonne.
The U.S. economy created jobs at the fastest pace in nine months in January
and the unemployment rate dropped to a near three-year low of 8.3 percent, with
nonfarm payrolls rising by 243,000 on the month.
The better-than-expected data prompted a surge in U.S. stock index futures
and a fall in U.S. Treasuries, highlighting improving risk appetite in financial
markets.
Sentiment was also boosted by data showing the pace of growth in the U.S.
services sector accelerated in January to its highest level in nearly a year.

Gains in metals prices were capped by a weak euro, which fell to a session
low against the dollar following the jobs report. A strong dollar makes
commodities priced in the U.S. unit more expensive for holders of other
currencies.
Although the data paints a rosier outlook for the U.S. economy, analysts
warned that direction in metals markets is likely to be dictated to a greater
degree by news out of top consumer China, where demand concerns linger.
"This was a knee-jerk reaction but we need the dust to settle a bit and to
get a bit more clarity about what is happening in China," said Edward Meir,
analyst at INTL FCStone.
"The outlook for China is much more important (for the metals market). The
fact that premiums there are softening and there has been a big buildup in stock
is more of a concern to the market."
Signalling softer demand, inventories of copper in warehouses monitored by
the Shanghai Futures Exchange surged by more than one third over the past two
weeks, data showed, because of strong imports in January and slower consumption
during the Lunar New Year holidays.
"It is difficult to read the numbers because of the Chinese New Year, but
nevertheless it does seem the rush of imports was not to go for immediate
consumption but rather into stocks, which gives pause for thought," BNP Paribas
analyst Stephen Briggs said.
A dip in China's non-manufacturing sector also dampened spirits.
On Wednesday, government data showed China's factory activity rose in
January. But it was a different picture for the services sector, with official
data on Friday showing it fell to 52.9 in January from 56.0 in December due to
weak property investment.
"Overall, it seems that China's appetite for metals is currently less
voracious, particularly after the sharp price increase during the Chinese New
Year holiday," Credit Suisse said in a research note.
It said Chinese consumers were likely to re-enter the market once prices
come off current levels.
Despite Friday's late gains, copper was up only 0.5 percent on the week, as
the uncertain outlook for Chinese demand and lingering concerns about the euro
zone debt crisis weighed on sentiment.
Still, there were some bright spots in Friday's series of purchasing
managers indexes, which measure changes in the activities of companies all over
the world.
The euro zone's vast services economy snapped four months of decline by
expanding last month, albeit very weakly. The PMIs suggested that a recession
there, widely expected by economists, will be mild.

GLENCORE/XSTRATA IN FOCUS
The metals market is also watching news that commodities trader Glencore
is in talks to buy mining group Xstrata that could create a
group worth more than 50 billion pounds ($79 billion).
"People will be looking at any implications for this," Briggs said. "Clearly
these sorts of mergers increase concentration in the mining industry, which is
bullish...but not necessarily good news for consumers."
Tin traded at $24,400 a tonne from $24,150, nickel was at
$21,305 a tonne from $20,850. Aluminium was untraded at the close, but
bid at $2,247 from $2,195.
Zinc traded at $2,155 from $2,095 and lead was at $2,225
from $2,164.

Metal Prices at 1708 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
move
COMEX Cu 389.35 11.25 +2.98 444.70 -12.45
LME Alum 2251.50 56.50 +2.57 2470.00 -8.85
LME Cu 8570.00 225.00 +2.70 9600.00 -10.73
LME Lead 2220.50 56.50 +2.61 2550.00 -12.92
LME Nickel 21324.00 474.00 +2.27 24750.00 -13.84
LME Tin 24350.00 200.00 +0.83 26900.00 -9.48
LME Zinc 2147.00 52.00 +2.48 2454.00 -12.51
SHFE Alu 16190.00 -80.00 -0.49 16840.00 -3.86
SHFE Cu* 59820.00 -60.00 -0.10 71850.00 -16.74
SHFE Zin 15955.00 10.00 +0.06 19475.00 -18.07
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07